You are here

Rough diamond buyers almost by default desire ‘original’ rough, flowing directly from the mine of origin to the tender house. With current supply limited and no major increases on the horizon, however, maximizing the volume of available goods becomes more of a priority. Adam Schulman at Koin International tender house in Antwerp believes he has found an answer in KoinDex, a sales system that takes the hidden supply of rough diamonds already available to the market and packages them into parcels deserving of the same respect and attention from buyers that original rough goods receive. The KoinDex sales system runs parallel to but clearly separate from the sale of original goods on the Koin tender platform.

Facilitating the flow of market goods

As Schulman explains, the traditional way of trading across the bargaining table is a thing of the past, and suppliers are struggling to move their inventory. “The market is losing buyers because (of a lack) of access to finance, of trust, and synthetics starting to hit demand for smaller goods. Buyers would come to me and say, ‘I don’t have time to go to all of the offices and fly around to different trade centers to obtain goods, arguing over the price.’ The issue is not necessarily a lack of rough supply, rather that buyers are struggling to get reliable access to that supply.” Furthermore, credit issues have put many sellers off of selling to people they do not know, which has become an increasingly significant issue.

“I thought one solution might be to get (secondary) market goods - which may also be original, but have come through a middle man instead of directly from the mine - into the tender houses, and make them desirable. So, that is what we have started doing.” Schulman decided to try out the idea by taking in 10-15 parcels from the market per tender and figuring out the best way to tender them. It was a process of trial and error Koin initiated starting from January last year.

Changing perceptions

The key, he emphasizes, is changing the perception of market goods. “Often, the discrepancy between original and market goods is based on an illusion. People are inclined to think secondary goods [not coming straight from a specific mine] are inferior, but this is not always the case. If, for instance, a De Beers sightholder or smaller diamond buyer doesn’t manage to use all the goods purchased and holds them in stock for a while, they are no longer original goods, but they are still the same stones that came from De Beers or any other mine. Our plan is to give those potential suppliers direct access to hundreds of buyers, and to give buyers a new, highly transparent path to acquisition,” Schulman tells us.

“Say you have a parcel to sell. You bring them to us, and our team of Koin experts checks the parcels to see that they make the grade. This first step is to eliminate those parcels that won’t sell - we are not going to take in just anything, no rejects or leftovers. If this initiative is going to succeed, we must have a high sell-through on the goods, which means the supply must meet the expectations of our very demanding buyers who have become highly selective to protect their margins. Once we have determined a parcel meets our expectations, we agree with the seller on a valuation price. We give our estimate and the seller gives his or hers, and if we reach an agreement, we will tender the goods. Given that KoinDex parcels are sold solely on a cash basis, without any terms, it eliminates the credit risk.”

Koin’s system uses what is called a ‘trigger price’: unlike at a traditional tender where the market blindly decides the market price, here the minimum price is published. If that price is met the sale is guaranteed. Someone can always bid more, but the seller does not run the risk of the goods selling for less than anticipated. “It is all extremely transparent,” he explains. “With KoinDex, I believe Koin is the first to attempt to really brand this type of system. We want the buyer to understand exactly what KoinDex is and to know the difference between the goods on offer at any given tender.”

Identical product, backed by expertise

“Our goal is that the buyers will come to treat both products - original and market goods - equally. They are in fact an identical product. They just don’t have the same illusion surrounding them. We sort the parcels to replicate a run-of-mine, with the only difference that the run is not from a specific mine. We are currently on our fifth run now and have received such a positive response that I believe we will reach our goal in the next four to six months. I am very confident we will make it work.”

As Schulman sums it up, KoinDex gives rough suppliers the opportunity to access more buyers by serving as a conduit for them to liquidate available stock. Koin provides quality-control to reassure potential buyers. In return, the tender house gets access to a new supply line that is not restricted geographically. “The suppliers are certainly very interested. It simply makes too much sense: we offer an efficient, trusted and transparent system where they get far greater access to buyers than they would working their phones. We are rejecting 50-60% of goods brought to us and are still reaching our targets. The hard work is to convince the buyers.”

Schulman says they are gradually building confidence in the system, averaging about 50,000 carats per sale and $4 million to $9 million in turnover. They are also planning to introduce a ‘manufacturers parcel’ that would provide fixed parcels of goods of the same quality and volume on a monthly basis. This is designed particularly for small manufacturers, enabling them to plan their processing with the assurance that the goods will be available.